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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (71266)	10/7/2006 11:14:59 AM
From: Tommaso	Read Replies (2) \| Respond to of 110194

>>>No one here remembers the last one because no one here was investing in the 1930's Mish<<< If no one remembers it, you must be no one <G>. It's probably true that almost no one contributing to SI was an investor in the 1930s. But anyone who has ever taken a course in economics has probably heard about the 1930s. It is the most studied and most debated period in economic history. It's Bernanke's specialty. In a deflation, whatever deflation is, money becomes more valuable. You expect deflation, so you favor long term treasury bonds. As we all, know, simply holding cash in the early 1930s was a very lucrative thing to do (if that's not a redundant thing to say). At the start of the period, cash was freely exchangeable into gold, at a fixed rate. There is no longer anything to make money intrinsically valuable except the interest rate that it can command and its convenience for making transactions. For the time being, the dollar is enjoying a short-term vogue because it is the most convenient way to get out of one financial commitment and into another, or to await a future decision. The dollar is a good parking space, like the spaces in people's back yards in the vicinity of a major league ball game. When the demand for instant liquidity subsides, the dollar will resume its decline. I do not pretend to be above the crowd. I find myself with a larger position in four-week T-Bills than I have ever had (though not nearly as large as I wish it were). But this is a liquidity preference, not because I see the dollar as a store of value. I see commodities, for all their fearful volatility, as a much better store of value. Reasonably priced real estate, especially rent-yielding real estate, would also be a good store of value, but nothing is reasonably priced.